January 19, 2024/FBNQuest Research

Today, we turn our attention to the December ’23 edition of the Food Security update published by the World Bank. The monthly report provides a global overview of the agricultural commodities market, including current trends and market projections. According to the report, domestic food inflation remains high in low, middle, and high-income nations, particularly in countries located in Africa, North America, Latin America, South Asia, Europe, and Central Asia. However, the Bank pointed out that the volatility in the agricultural commodity market is becoming less severe.

Compared to the Nov ’23 update, the agricultural, cereal and export price indexes increased by 2%, 6% and 1%, respectively. Similarly, maize and wheat prices increased by 8% m/m and 14% respectively.

Regarding commodities projections, the forecast for the production rice was favourable primarily due to expectations of higher output production for Indonesia and Tanzania.

The forecast for maize production was raised upward mainly due to an upward revision of the commodity’s output in the US.  

In contrast, the production projection for soybean were lowered due to less promising output expectations in Brazil and India.

According to the Bank, global sugar prices, which have remained elevated, increased to a 13-year-high, mainly due to production shortages associated with El-Nino in major exporting countries in South and South-east Asia, port bottlenecks in Brazil, and export restrictions.

Notably, El Niño has resulted in dry weather and damaged harvests, negatively impacting sugar production in both India and Thailand, the two largest exporters after Brazil.

Consequently, the lower global supplies have translated to rising domestic sugar prices, especially in countries like Nigeria that depend on the importation of raw sugar.  

The Bank expects further upward pressure on global sugar prices from tighter global sugar supplies and anticipated effects of El-Nino on production output.

Additionally, it also anticipated that increased demand for biofuels would trigger a rise in sugar prices.

For the Sub-Saharan Africa region, the Bank sees a y/y reduction in cereal production in Chad, Mali, and Nigeria primarily due to a combination of dry period during the growing season, insecurity, and limited access to agricultural inputs.  

Furthermore, the Bank asserted that the limited food storage capacity, infrastructural deficits, local supply disruptions, currency depreciation, widening fiscal deficit and public debts were causes of rising domestic inflation experienced in the region.

The bank also noted that risks to global food security remain titled in the balance, including EL-Nino conditions which could potentially impact production, higher energy prices, and restricted fiscal space in food crisis countries.